Scottsdale’s economy outperformed projections during the summer months but city officials caution the trend may not continue now that supplemental federal unemployment benefits have expired.
City Council approved a $1.54-billion budget in June calling for $30 million to $40 million in cuts.
That included a $18.4-million cut in General Fund spending, from $296.1 to $277.7 million, because of concerns about the pandemic’s impact on tourism, restaurants, retail and other important economic drivers.
But City Treasurer Jeff Nichols told Council on Sept. 22 that the city’s economy performed better than expected over the summer.
Through July 31, the city brought in $24 million in local tax revenue – a 22 percent increase over the $19.7 million projected in the budget. That haul in July was still down $2.3 million from the same time last year.
The city saw total revenues through July 31 exceed projections by $8.3 million, or 19 percent.
Overall, the city is beating budget projections by $10 million as a result of the unanticipated higher tax haul and spending that has been $1.3 million less than projected.
The city spent $36.6 million through the end of July – $10.9 million less than it did the same time last year.
The increase in revenue was driven by unforeseen upticks in activity across a number of business sectors.
That included a 97 percent increase in revenues from hotels, which delivered around $400,000 in taxes versus the $200,000 projected in the budget.
That increase surprised city officials, though the industry as a whole is still experiencing significant pandemic-driven declines.
Experience Scottsdale reported that in August, Scottsdale-area hotels recorded an occupancy rate of 29 percent – 50.5 percent below August 2019.
The industry could get a boost from events planned at WestWorld in the coming months.
At the Sept. 22 Council meeting, city staff noted that Barrett-Jackson’s fall car auction on Oct. 22-24 is expected to draw more than 5,000 people and that the event has contracted room rates with multiple Scottsdale hotels.
Other industries that saw significant increases include automotive sales, construction, entertainment, food stores and retail sales.
Nichols said this increased activity is likely connected to federal CARES Act fund that provided $600 per week in additional payments to unemployed individuals on top of the maximum of $240 per week provided by the state of Arizona.
Congress has thus far failed to pass a new round of enhanced unemployment payments since the original package expired on July 31, leaving unemployed people to rely solely on state benefits.
Arizona’s maximum of $240 per week in unemployment payments is the second lowest in the country behind only Mississippi.
Nichols said the lack of new federal package could impact the city’s ability to continue beating revenue projections in future months.
“So, these people that are out of their unemployment payments or they’ve gone down to $240 per week may have a negative impact as we start seeing the activities in August and September,” Nichols said.
Additionally, most recipients have likely exhausted the $1,200 in stimulus payments sent to most Americans in April.
Congress has failed to pass a new round of stimulus payments despite polls showing widespread bipartisan support for that type of support.
According to July Reuters/Ipsos poll, 77 percent of Americans supported “giving all Americans stimulus checks to counter the coronavirus economic damage,” including 71 percent of Republicans.
City Manager Jim Thompson said he was “cautiously optimistic” about the increased revenues shown in the city’s latest report but that he would to wait to celebrate until seeing the results for January through March, historically the city’s top-revenue months.
Thompson said city staff is currently evaluating whether to bring back some of the $27.5 million in cuts that remain in the budget through the end of this fiscal year, including reopening Arabian and Appaloosa libraries, which are currently only open for drive-thru service.
“We’re not asking to change any of that right now, and I’m not moving forward with any of those at this time, because, again, cautiously optimistic is probably the best position we can take,” Thompson said.